Observations on economics, the academy, the wider world, and things that run on rails.

28.2.16

URBAN STRUCTURE IS EMERGENT.

Complex adaptive systems tend to do what they d**n well please, including the complex adaptive systems we know as cities, or as metropolitan areas. And somewhere (perhaps it goes back to Daedalus sketching pretty lines in the sand) comes the idea that something so built must require intelligent design.

For most of the field’s history, prominent urban planning theorists have taken for granted that cities require extensive central planning. With the question framed as “To plan or not to plan?” students and practitioners answer with an emphatic “Yes,” subsequently setting out to impose their particular ideal order on what they perceived to be, as Lewis Mumford put it, “solidified chaos.” Whether through the controlled centralization of Le Corbusier or the controlled decentralization of Ebenezer Howard and Frank Lloyd Wright, cities were to be just that: controlled. When in 1961 Jane Jacobs set out to attack the orthodox tradition of urban planning, it was this dogma that landed squarely in her crosshairs. With her characteristically deceptive simplicity, she invites us to ask, “Who plans?”

At the Market Urbanism post, the answer is "Not the Wise Experts."

Where grand plans of this kind are necessary, planners should emphasize flexibility in order to support the dynamism of decentralized planning. Where grand plans are not necessary, planners should stick to the trial-and-error of decentralized planning. Jacobs makes this case when she argues for embedding individual subsidized housing units into already functioning neighborhoods rather than tearing down and replacing whole neighborhoods. While an individual building may fail, its failure won’t be nearly be catastrophic as the failure of a grand housing project plan. Meanwhile, a small success can be studied, replicated, and scaled up when appropriate.

As Hayek did in the case of economics, Jacobs stood up to an urban planning orthodoxy that enjoyed the support of policymakers, academics, and all the “Very Serious People.” She celebrated the wisdom of everyday people when the relevant experts found answers only in statistical aggregates and economic calculus. Hayek and Jacobs defended the importance of local knowledge, illustrated the power of decentralized planning, and celebrated the sublime spontaneous orders that organize our lives. Yet their theoretical innovations went largely unnoticed long after their respective publications. Here, the two thinkers diverge: while Hayekian ideas have largely driven centralized economic planning into the dustbin of history, I suspect the Jacobsian urban revolution has only just begun.

Where the concrete hits the forms, there are encouraging signs. Start in Chicago, where Marisa Novara makes a provocative statement about gentrification driving homeowners of more modest means out. "If I told you that the key to minimizing displacement of long-time, working-class residents is to build housing that’s not for them, would you believe me?" That's straightforward for anyone who understands economics (even a relatively un-nuanced version.) Build houses for the people who want to buy houses. The nuance, though, is in understanding that gentrification is often a consequence of population migration, without construction, whether of modest or of posh, housing.

In a recent discussion with MPC staff, DePaul professor John Joe Schlichtman pointed out that we often view gentrification as a cause rather than an outcome. This means that when we see or experience displacement by rising property values, we say that gentrification caused this problem.

In fact, what is playing out in this scenario is that in a given area, people with more means than the traditional population have decided that they want to live there too. Because the newer, higher-income set has more resources at their disposal, if the number of units available stays static, they will simply pay more to live there. Gentrification didn’t cause this process, gentrification is the outcome of this process.

That's not going to sit well with the current residents.

Often when people are protesting new development, they say a version of the idea that they want their neighborhood to stay as it is. I get that, especially when you’ve fought to create a vibrant place that feels like home and, most importantly, is one that you can afford.

But if you find yourself saying that, it means the forces are already underway. Not building more units cannot freeze those forces.

In Chicago, resident population has been decreasing, and there are full neighborhoods losing population, which may offer a way out involving building the fancier housing near the gentrifying neighborhoods. But that's not going to be easily done, either by the wisdom of the men and women of system, or the clout of Donald Trump or Tom Ricketts.

If rising housing costs and displacement are happening, the neighborhood is not going to stay as it was. My top questions then become, How can we shape the outcome of a process that is happening? How can we keep as many longtime residents as possible?

In San Francisco, there's in-migration, in the presence of fewer vacant houses, and the same struggle between doing what looks like the obvious but wrong fix or doing the unintuitive but possibly helpful policy change is going on.

The economic disaster of the Great Recession served as painful lesson on the dangers of deregulated markets. The lesson was particularly painful for many because the market in question was the housing market and the commodities being traded and bet on were people’s homes.

A decade later housing is back in the headlines, as skyrocketing rents in many cities are fueling a crisis of affordability and contributing to a new wave of gentrification and displacement. But despite what we should have learned, there is no shortage of commentators stating with unshakable faith that the crisis is the result of someone, somewhere, getting in the way of the market.

I'm not sure upon reading this whether it's the presence of trading and betting on homes, or the absence, that's the worse thing. In San Francisco proper, gentrification is the outcome of tech workers with means buying houses within the City for access to nightlife or whatever. Mr Samara's gripe about snob zoning, or no-further-construction, elsewhere in the Bay Area contributing to upscale tech workers bidding up City house prices, however, is precisely what happens when someone, somewhere -- specifically, elsewhere in the Bay Area -- imposing constraints on the market.

Samara's piece sets out from the puzzling notion that San Francisco's economic and moral imperative to build housing is negated by other municipalities' refusal to do so. This is like telling California to abandon efforts to cut greenhouse gas emissions because Wyoming isn't pulling its weight. But more importantly, it is demonstrably false that San Francisco "shoulders a disproportionate share of the housing burden" and "looks pretty good when compared with other jurisdictions."

From 2010 to 2014, San Francisco added around 100,000 jobs. With only 8,290 housing units built during this same period, San Francisco came nowhere near meeting the needs of those new workers, let alone filling pre-existing deficits. In 2014, San Francisco's roughly 639,000 workers were duking it out over a mere 379,597 housing units. San Francisco's absolute and proportional rates of housing growth also remain well below both their historical highs and those of comparable high-tech cities, like Austin and Seattle.

Believing in separate "affordable" and "unaffordable" housing markets is fundamentally incompatible with concerns about displacement and gentrification. Displacement itself results from high-income households moving down market to find housing. Market-rate units therefore provide a crucial escape valve to relieve overall housing pressure. As they age, market-rate units can also very well become tomorrow's "affordable" housing. Samara insists that market-rate construction has no role to play in relieving the housing crisis, but he offers little to refute the "growing cross-ideological consensus" that growth restrictions push up housing prices and exacerbate economic segregation and inequality.

Samara illogically implies that building more housing creates an insurmountable demand for yet more affordable housing, ad infinitum. If this were true, cities with faster growth in market-rate units would have greater affordability problems, but this is not the case. Data show that markets with the fastest supply growth are among the least expensive, while the most expensive housing markets have some of the slowest supply growth. The issue is not that new market-rate housing in San Francisco generates an unusual number of low-paying jobs. Instead, the extraordinary cost of Bay Area housing overall means that an unusually large proportion of new workers are unable to find market-rate housing they can afford. Moreover, new construction is the primary mechanism by which San Francisco finances and creates new affordable units.

Thus, in the Bay Area, shaping a process isn't easy.

Crafting good public policy requires us to look beyond the interpretations and approaches that flatter our ideologies, and be honest with ourselves about what works. Alleviating the housing crisis depends on it.

Walmart’s store closures are a powerful reminder of the perils of relying on large, absentee companies—for our economic well-being, and for groceries too. The road ahead will get much bumpier with the growth of online shopping, which is all the more reason that cities should prioritize locally owned businesses that have deep roots and insist on building structures and places that are designed to last.

Be careful, though, what you wish for. Prioritization with an overlay of planning mandates is a political environment conducive to rent-seekers.